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GoTo Group: Indonesia’s unicorns unite for tech dominance  

Creativa Images, Shutterstock.com
Tokopedia tower in Jakarta (Source: Creativa Images, Shutterstock.com)

Indonesia’s two biggest startups have joined forces to form the largest technology group in Southeast Asia’s fastest-growing internet economy nation. The union of Gojek, the mobility and payments platform, and e-commerce company Tokopedia into GoTo Group comes amid a surge of competition for fintech and internet-services innovation markets in Southeast Asia.

The deal “marks the largest ever business combination in Indonesia and the largest between two Asia-based internet media and services companies to date”, the two companies said in a statement.  

The combined entity has over 11 million merchant partners, 100 million monthly active users, and 2 million registered drivers. Besides this, the two companies registered over 1.8 billion transactions in 2020, as of December 2020. Together as the largest digital consumer platform, the total group gross transaction value amounts to $22 bn in 2020. 

The GoTo combination was supported by 100% of both companies’ global heavyweight shareholders. The existing investors’ list included Alibaba Group, BlackRock, Capital Group, Facebook and PayPal, Google, JD.com, Sequoia Capital India, SoftBank Vision Fund 1, Tencent, and Visa. After the merger, Gojek shareholders now hold around 58% of GoTo, while Tokopedia’s have 42%. SoftBank scored the largest single shareholding in the merged company at 15.3%, the Alibaba Group held a 12.6% stake.

GoTo goes public

Following the merger, the Jakarta-based company is planning for an initial public offering (IPO) by the end of 2021, in Indonesia, as well in the US. Its public debut is likely to occur in Jakarta first, as the first major IPO by an Indonesian tech start-up. Ahead of the listing, the newly merged entity’s market valuation is estimated between $30 and $40 bn in Jakarta and the US, Bloomberg reported. 

The public market value of the supercharged super-app GoTo is likely to be higher than the $18 bn combined past valuation of the two firms, stated the group CEO Andre Soelistyo. 

Meanwhile, the GoTo Group is targeting another round of fundraising of $2 bn, ahead of blockbuster IPO this year, Reuters reported. This could make it one of the most valuable technology companies in Southeast Asia.

The Gojek-Tokopedia merger was announced in May 2021. This was after its rival Singapore-based Grab Holdings announced in April to go public in the US at around $40 bn through a merger with a special-purpose acquisition company, or SPAC.

Huge potential of Indonesia’s digital economy

Both born in Indonesia, Gojek and Tokopedia plan to bring innovations together to support the growth of the digital evolution of Indonesia. The two giants operate an ecosystem that encompasses 2% of the country’s $1 trn GDP. The E-commerce industry is expected to be the main driver of growth for Indonesia’s digital economy. Moreover, it is poised to be valued at $83 bn by 2025. Adding to this, the country is home to 20% of all fintech companies in Southeast Asia. 

The biggest business tie-up as one of the fastest-growing digital economies was greeted by the country’s government officials. The Bank Indonesia (BI) warmly welcomed the newly minted GoTo, and Finance Minister Sri Mulyani too congratulated the union.  

As per company executives, the merger will help the combined entity pool their data sets and help expand user engagement. Gojek and Tokopedia worked together since 2015 for delivering packages along the country’s archipelago. Both plan on operating as separate businesses under the GoTo banner in the world’s fourth most populous country with 271 mn people. 

Andre Soelistyo, Gojek Group co-CEO, will lead the combined business as GoTo Group CEO. Meanwhile, Tokopedia’s Patrick Cao becomes GoTo Group president. Cao said, “We have Gojek’s high volume, high-frequency mobility transactions, combined with Tokopedia’s high value, medium frequency e-commerce transactions.” 

Battle of the Superapps

The GoTo Group plans to use its position in order to gather more services into one app. The merger will help GoTo Group to establish itself as a super app providing ride-hailing, e-commerce as well as financial services. Gojek owns a stake in an Indonesian digital bank. This will help the joined entity to aggressively compete with heavily funded super app Southeast Asian giants like Grab and Shopee. Meanwhile, Grab and Sea own digital bank licenses in Singapore.

As more and more Southeast Asians are shopping online during the pandemic, the region could offer explosive growth. Thus, the lineup for the super app model, which provides a range of services has begun.

Furthermore, the combined GoTo ecosystem comes after Gojek spent several quarters earlier exploring a merger with Grab. Amid Gojek and Grab’s fierce head-to-head battle, Tokopedia is competing with Sea. The Singaporean company has expanded its e-commerce market share throughout Southeast Asia. 

With merger and public listing announcements by Grab and GoTo, Southeast Asia’s tech space is turning highly competitive. The tech dominance battle in Southeast Asia continues as the region’s hot internet economy is expected to triple to more than $300 bn by 2025, research from Google, Temasek Holdings Pte, and Bain & Co. shows.